Final answer:
A company may support its stock price by decreasing the supply of stock through repurchases when it believes the stock is undervalued, aiming to raise the price and offer potential capital gains to investors. The correct answer is option C.
Step-by-step explanation:
When a company believes the market price of its stock is undervalued, it may attempt to support the price by decreasing the supply of stock through stock repurchases. This action is based on the concept that demand and supply set market prices; reducing the supply of stock available on the market can help increase the stock's price if demand remains constant. This strategy can result in a capital gain for investors who hold onto their shares. For companies, this can be a way to invest in themselves when they believe their stock is undervalued, signaling confidence to investors and potentially stabilizing or increasing their stock price.